Barrick Mining (NYSE: B) US$40.13

Barrick provided a quarterly update on Monday night in the US and produced a reasonable second quarter operationally, with stronger-than-expected gold production and costs helping earnings (EBITDA) beat expectations. However, the result was overshadowed by its agreement with Newmont over Nevada Gold Mines, with some obvious disappointment around the implied valuation of Barrick’s highly regarded Fourmile project.

Key results for the quarter:

• Revenue of US$5.29bn, around 3% ahead of US$5.15bn expected.
• Adjusted EBITDA of US$3.63bn, around 4% ahead of US$3.50bn expected.
• Adjusted EPS of US82c, in line with expectations and up from US47c a year ago.
• Gold production of 796koz, around 4% ahead of 763koz expected.
• Gold All-In-Sustaining-Cost (AISC) of US$1,866/oz, better than US$1,943/oz expected.
• Free cash flow of US$515m, well below the US$966m expected as capex increased to US$1.19bn.
• FY26 guidance was maintained at 2.9-3.25Moz of gold and 190-220kt of copper.

The bigger story was Fourmile. Newmont will pay Barrick US$1.95bn in cash as the companies contribute Fourmile and Newmont’s Fiberline and Mike projects into their Nevada Joint Venture (JV) and settle outstanding disputes. Barrick puts the overall package at around US$4bn, and importantly, Newmont has now given its consent for Barrick to proceed with the proposed IPO of its North American gold assets before year-end.

Strategically, clearing the dispute with Newmont is a positive. It removes a major roadblock to the IPO and should help accelerate development of Fourmile, which Barrick has previously described as one of the century’s great gold discoveries. However, the price appears to be the problem. Expectations had become elevated, with estimates for Newmont’s share of Fourmile running materially above the US$1.95bn payment. RBC, for example, had valued the equivalent stake at around US$4.2bn.

MM’s view: The underlying result was fine, with production and costs encouraging and FY26 guidance intact, but that’s not what the market focused on. Barrick has effectively traded some of Fourmile’s upside at a discount, to resolve its differences with Newmont and clear the path for the next catalyst for the business, the North American IPO – management needs to demonstrate that separating the assets can unlock enough value to justify both today’s Fourmile deal and the dilution of Barrick shareholders’ exposure to its best assets.

Thinking more broadly, it seems to us that Newmont is the beneficiary of this deal and has played a better hand. For us, we now contemplate whether moving our position into Newmont is a better use of capital.